EDN Asia recently spoke to Peter Kelly, executive vice president, Global Operations Group, Agere Systems. Kelly is responsible for the company's manufacturing and supply chain. Excerpts: EDN Asia:What are the key elements in designing a supply chain? Kelly: Speed and costs are the most important elements today. To implement a design chain, one needs first to understand what business problem your customer is trying to solve. You must have a map of overall supply chain to best tackle his problem. Earlier, one would focus only on a small part of the supply chain in which the designer was involved. That is no more the case now. Even if the designer is not involved in the entire supply chain, he has to consider the entire supply chain. For instance, your customer's customer may not be your customer; but even he should be an element in your design. Only then you can build the level of trust and understanding between all involved in the supply chain. While involving all in the design, the supply chain should be as lean as possible. Lean supply chain goes hand-in-hand with lean manufacturing, which again involves speed and costs. For instance, in Agere, assembly and test of products got reduced from five days to two days between 1997 and 2000. There has been a recent paradigm shift in the importance of the supply chain. Earlier, it used to be company vs company in market wars; giving more weightage to manufacturing than to supply chain. Now it is supply chain vs supply chain. Whoever has more efficient supply chain wins market wars.
EDN Asia:After the recent debacle of forecasting, what part does forecasting play in the supply chain design?Kelly: The supply chain is at a disadvantage today because demand cannot be forecast accurately, unlike in the past. A company needs to consider whether it needs an off-the-shelf tool or proprietary tool to gauge demand. Agere has made a proprietary tool in collaboration with Lehigh University, because we believe the algorithms for accurate demand modeling don't exist commercially. This tool uses data for the last three years to predict demand for 18 months. The supply chain should be realistically able to place right product in the right place at the right time to meet all kinds of demands. Our proprietary tool has functioned reasonably well in predicting demand.
EDN Asia:Can you say something about the algorithms used in designing your proprietary tool?Kelly: We try to forecast how volatile a customer's view of demand is within a specific time window, and what change a customer may make in a time frame. Customer demands vary widely. Generally customers will need products in four to six weeks. But some want within 24 hours, or even six hours. We are always in touch with customers to monitor their demand, and keep on updating our database. While this applies to existing customers, for new customers we make estimates based on their current and future demand perceptions.
EDN Asia:What is the impact of outsourcing on the supply chain? Kelly: Outsourcing has brought in complications. While on one side you aim at lean, fast and cost-effective supply chain, on the other, you have to work with more people. You tend to lose control easily, and you have to work in different ways in different conditions. Developing strong relationships is more challenging in the outsourcing era than in the earlier one.
EDN Asia:What should an IC designer know about a supply chain? Kelly: That the customer should positively get the product when he wants it. So the designer should be able to design the product in the time available. Perhaps some day designers may come out with totally programmable ICs those can be customized whenever customer demand arises. Today costs and technology do not allow totally programmable ICs.
